# Demand: Utility and Marginality

The case assignment focuses on several concepts from the labor market including marginal production, total production, and wage determination. These terms are important in determining how many workers will be hired by a firm.

Write a full 3 page paper that’s addresses the following questions:

1. Discuss two factors that would increase demand for labor. (Hint: Recall that the demand for factors of production or resources is called a derived demand)

2. If the market price of the good or service that a firm produces increases, what happen to the demand of labor? Explain.

3. Numerical Problems. Answer the two questions below.

a. Take a look at the numerical example on page 76 of the online text (http://www.inflateyourmind.com/pdfs/microeconomics.pdf). What would be the marginal production at a level of 20 workers? Calculate. What can be said about the total production of cars as more workers are added (Hint: use the economic concept from the chapter in your answer
http://www.inflateyourmind.com/pdfs/microeconomics.pdf
http://www.web-books.com/eLibrary/NC/B0/B63/TOC.html

b. Using you answer from (a) and using the information below:

1. Each worker costs the firm \$4,000 per month.

2. Each acre of land costs the firm \$1,000 per month.

3. Each machine costs the firm \$600 per month.

-Each worker costs the firm \$4,000 per month.

-Price of the output (car) is \$20,000

Should the firm move from the 15th to the 20th worker? In other words, should the firm hire 20 workers. Why? (Hint: You need to calculate the cost of total workers and the marginal revenue product (MRP = price of output * marginal product of labor)).

Case Assignment Expectations:

Use concepts from the modular background readings as well as any good quality resources you can find. Pleas be sure to cite all sources within the text and provide a reference list at the end of the paper.

Length: 3 pages double spaced and typed.

The following items will be assessed in particular:

Your ability to understand marginal productivity and how firms make decisions.

Some in-text references to the modular background material (APA formatting not required).